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Investor Presentation March 2018 NYSE AMERICAN: CTEK
InvestorPresentationMarch2018NYSEAMERICAN:CTEK
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SafeHarborStatementsThispresentationcontains,andourofficersandrepresentativesmayfromtimetotimemake,“forward-
lookingstatements”withinthemeaningofthesafeharborprovisionsoftheU.S.PrivateSecuritiesLitigationReformActof1995.Forward-lookingstatementscanbeidentifiedbywordssuchas:“anticipate,”“intend,”“plan,”“goal,”“seek,”“believe,”“project,”“estimate,”“expect,”“strategy,”“future,”“likely,”“may,”“should,”“will”andsimilarreferencestofutureperiods.Examplesofforward-lookingstatementsinclude,amongothers,statementswemake(hereinorotherwise)regardingthesizeofthepotentialmarketforourservices;thenumberofpotentialcustomers/clientsforourservices;plansandstrategiesofCynergisTekanditssubsidiariesforfuturegrowthandperformance;marketacceptanceofourbusinessmodel;ourabilitytointegrateacquisitionsandmergedcompanies;andtimelinesrelatingtogrowth,milestones,andstrategicfocus.
Forward-lookingstatementsareneitherhistoricalfactsnorassurancesoffutureperformance.Instead,theyarebasedonlyonmanagement’scurrentbeliefs,expectationsandassumptionsregardingthefutureofourbusiness,futureplansandstrategies,projections,anticipatedeventsandtrends,theeconomyandotherfutureconditions.Becauseforward-lookingstatementsrelatetothefuture,theyaresubjecttoinherentuncertainties,risksandchangesincircumstancesthataredifficulttopredictandmanyofwhichareoutsideofourcontrol.Ouractualresultsandfinancialconditionmaydiffermateriallyfromthoseindicatedintheforward-lookingstatements.Therefore,youshouldnotrelyonanyoftheseforward-lookingstatements. Importantfactorsthatcouldcauseouractualresultsandfinancialconditiontodiffermateriallyfromthoseindicatedintheforward-lookingstatementsinclude,amongothers,theriskfactorsdiscussedthroughoutPartII,Item7.Management’sDiscussionandAnalysisofFinancialConditionandResultsofOperations,andinPartI,Item1A.RiskFactorsofourAnnualReportonForm10-KfortheyearendedDecember31,2017;andinotherfilingsmadefromtimetotimewiththeSecuritiesandExchangeCommission.Anyforward-lookingstatementmadebyusinthispresentationisbasedonlyoninformationcurrentlyavailabletousandspeaksonlyasofthedateonwhichitismade.Weexpresslydisclaimanyobligationtopubliclyupdateanyforward-lookingstatement,whetherwrittenororal,thatmaybemadefromtimetotime,whetherasaresultofnewinformation,futuredevelopments,orotherwise.
Introduction
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CynergisTekCybersecurityandInformationManagementforHealthcare
NationwidePresenceConsultantsaverage15yearsofexperienceintheirdomainexpertisewith100+individualindustryrecognized
certifications
2017Revenue$72M
AdjustedEBITDA$7.8M
CoveredEntities*1,000healthcare
providerlocationsandbusinessassociates
Contracts70%ofclientsin3-5
yearmanagedservicescontracts
*Coveredentities are defined intheHealthInsurancePortabilityandAccountabilityAct(HIPAA)rulesas(1)healthplans,(2)healthcareclearinghouses,and(3)healthcareproviderswhoelectronicallytransmitanyhealthinformationinconnectionwithtransactionsforwhichthedepartmentofHealthandHumanServices(HHS)hasadoptedstandards.
MarketOpportunity
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PrintHasIncreased11%SignificantrisktoPHIandcostsavingsopportunityforhospital.
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CostofaBreachBreachescostthehealthcareindustry$6.2B/yr1,90%ofall
hospitalshadabreachinthepasttwoyears.2
HealthcareITIndustryDynamics3.5MillionCoveredEntitiesand35MillionBusinessAssociates
ITSpendonSecurity3
Healthcare4-6%Financial10-12%Government7-9%
InternetofThings(IoT)Estimated27billiondevicesby
2019.Biomedicaldevicerisk.
IncreasedRegulationOCRenforcementofHIPAAamong
coveredentitiesandbusinessassociates.
LackofResourcesCybersecuritylaborcrunchtohit1.5millionunfilledjobsby20194 with84%ofhospitalslackingadedicated
securityleader5
*Referencesonslide23.
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$11BDomesticMarketOpportunity
Healthcare$11B9 Market
EHRproduces60% ofprintvolume6
-Paperrepresents30%ofallbreaches
$65B- estimatedcumulativehealthcarecybersecurityspendonproductsandservices
overthenextfiveyears7
Hackingincidentsinvolvingransomware
andmalwaredoubled from
2016to20178
37% ofdatabreachesin2017weretiedtoinsidererrororwrongdoing,whichcompromised
nearly1.7millionpatientrecords8
Thefundamentaldifferencebetweenhealthcareandotherindustriesisthatit’snotjustaboutmoneyandinformation,it’saboutthequalityofcareandpatientsafety.
*Referencesonslide23.
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IntheNews
HealthcareOrganizationswillbethemosttargetedsectorwithnewsophisticatedattacksemerging
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2
3
Ransomware64%ofvictimsintheU.S.payransom
ThreatsTrendof1breachadaycontinuesinto2018(Healthcarespecific) 8
WeaponizedIoTdevicesTakedowncriticalcloudservices
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5
DisruptiveAttacksShutting downhospitals
IdentityTheftEverytwosecondssomeoneisavictimofidentitytheft
6GlobalNearly1billionpeoplegloballywerevictimsofcybercrimein2017up45%from2016 10
Victimsofcybercrimegloballylost$172billion 10
*Referencesonslide23.
Solutions
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TheServicesWeProvide
ConsultingServices
• RiskAssessment• TechnicalSecurityAssessment
• PrintSecurityAssessment• ArchitectureAssessment• SocialEngineeringandPhishing
• PrivacyProgramAssessment
• PolicyandProcedureDevelopment
• ComplianceProgramEffectivenessAssessment
• HIPAAResearchProgramAssessment
• MeaningfulUseAudits
ManagedServices
• ComplianceAssistPartnerProgram
• VendorSecurityManagement
• PrivacyMonitoring• VulnerabilityManagement
• ManagedPrintService• IncidentResponseManagement
ProfessionalServices
• Remediation• ProgramDevelopment• StrategicStaffing• VirtualCISO
Security/Privacy/Compliance/CostAvoidance
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CompetitiveAdvantageUnmatchedHealthcareCybersecurityExperts
StrongRelationshipsandTrackRecord
ThoughtLeaders
TrustedAdvisor
WellKnownIndustryPlayer
MarketDriven
TailoredSolutions
CynergisTekwonthe2017BestinKLASAwardforCyberSecurityAdvisoryServices
FinancialPerformance
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SnapshotNYSE AMERICAN 3/21/2018
Shareprice $4.80
Marketcap $45.1M
FDSharesOutstanding 9.4M
SharesOwnedbyMgmt.andBoard
25%
IncomeStatement 2016 2017
Revenue $60M $72M
AdjustedEBITDA1 $3.4M $7.8M
AdjustedEarnings1 $3.3M $6.1M
Cash $6.1M $4.3M2
Debt $1.3M $20.9M1 Pleaseseeourannualandquarterlyearningsreleasesforcompletedetails.2Companymaintainsa$5Mreceivablebasedlineofcreditwith$0balanceoutstanding.
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RevenueFinancialHighlights
$44
$61 $60
$72
19% 17% 20%
29%
2014 2015 2016 2017
Revenue GrossMargin
$INM
ILLIONS
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AdjustedEBITDAFinancialHighlights
1AdjustedEBITDA:adjustingEBITDAforstockbasedcompensation.2AdjustedEarnings:adjustingnetincomeforestimatedcashtaxadjustment,adjustmentincontingentconsiderationfromacquisition,amortizationandimpairmentofintangibles,stockbasedcompensationanddepreciation.
$2.1$1.8
$3.4
$7.8
$1.8 $1.7
$3.3
$6.1
2014 2015 2016 2017
AdjustedEBITDA AdjustedEarnings
$INM
ILLIONS
AboutUs
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SnapshotofClients
Samplerepresentationofmorethan1,000healthcareproviderlocationsandbusinessassociates.
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ManagementTeam
MacMcMillanChiefExecutiveOfficer
PaulAnthonyChiefFinancialOfficer
Machasnearly40yearsofbothgovernmentandprivatesectorexperience.HeservedasDirectorofSecurityfortwoDefenseAgenciesandasanIntelligenceOfficerintheU.S.Marines. Hehasworkedinthehealthcareindustrysincehisretirementfromthefederalgovernmentandcontributesregularlytoindustrythoughtleadership.
PaulisaCertifiedPublicAccountantandanexpertinfinancialmanagement,investorrelations,tax,treasuryandriskmanagementwithover25yearsofprofessionalservicesexperiencewithworldwideenterprises,publiclytradedcompaniesandstart-ups.HiscareerhasincludedtimewithKPMG,PeatMarwickLLPandIBM.
AngelaRiveraEVPOperations
DavidFinnEVPStrategy
AngelaRiveraisapassionateexecutivewith25yearsofexperienceinthehealthcareindustrywithsignificantfocusservingthehealthcareproviderindustry. Ms.Riveraservedthelast17yearsinvariousrolesatComputerTaskGroup. InhermostrecentroleasVicePresident,HealthSolutionsforComputerTaskGroup,sheheldexecutiveresponsibilityforsolutionsandgrowthstrategy,qualityservicedelivery,andmanagementoftheprofessionalconsultingbasethatdeliveredinformationtechnologyservicesandsolutionstoCTG’shealthcareprovider,payer,andlifesciencesclientsinNorthAmerica.
David,comesfromSymantecandhasbeeninvolvedinleadingtheplanning,management,andcontrolofenterprise-wide,mission-criticalinformationtechnologyandbusinessprocessesformorethan30years.Hisuniqueexperienceinriskmanagementandcontrolobjectivesoftechnology(includingaudit,security,andprivacy)allowshimadistinctiveperspectiveinthedesignandimplementationofbusinessapplicationsandtheprocessesthatthetechnologymustsupport.
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Create$150MRecurringRevenueHealthcareIT
ServicesBusiness5yeargoalwith>15%adjusted
EBITDA.
GrowthInitiatives
EmployeeInvestmentContinuetostrengthenandbuildontheteamsdepthofknowledgein
cybersecurity.
CybersecurityFocusContinuegrowingserviceofferings
tomeetmarketdemand.Bethe#1trustedsourceinthe
market.
IncreaseShareholderValue
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BoardofDirectors
J.D.AboucharChairmanoftheBoard
DrexDeFordDirector
PrincipalatDrexioDigitalHealth,formerHealthcare
CIO
MacMcMillanDirector
CEOOFCynergisTek
JudyKrandelDirector
Peerstream CFO
TheresaMeadowsDirectorSVP/CIO
CooksChildren’sHealthCareSystem
MarkRobersonChairmanoftheAudit
CommitteeCOOofChanticleerHolding,
Inc.
TransitionofBoardin2016and2017
bringinginhealthcareITandcapitalmarkets
expertise
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InvestmentThesisfortheNewCTEK
FY17:Transformation
FY18:Execution
FY19&FY20:Opportunity
Growanddeployprofessionalandprivacyservicesofferingsthathelphealthcareorganizationsremediate,developandimplementprogramsandtechnologytofulfillshort
andlong-termsecurityandprivacyroles
Wellpositionedforsustainablemidtohighorganicrevenuegrowth
Fundamentaloperationalimprovementsexpectedtoresultinindustry-leadingoperatingmargin
Experiencedmanagementteamwithprovenoperationalsuccessanddeephealthcarecybersecurityknowledge
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References
HealthcareITIndustryDynamics:1 Beckers HealthcareITandCIOReview,20172 HIMSSAnalyticsHealthcareITSecurityandRiskManagementStudy,20163 SANSITSecuritySpendingReport,20164CybersecurityVenturesHealthcareCybersecurityReport2017Edition5BlackBookResearchQ42017surveyofUSHealthcareIndustry
$11BDomesticMarketOpportunity:6 Nuance7 CybersecurityVenturesHealthcareCybersecurityReport2017Edition8 Protenus,Inc.andDataBreaches.Net 2017AnnualBreachBarometer9 GrandviewResearchIncHealthcareCybersecurityMarketAnalysisandSegmentForecastto2022
IntheNews:10 2017NortonCybersecurityInsightsReports– GlobalResults
